Lockdown and Control in Yangtze River Basin Imposes Significant Impact on Delta’s Wujiang Plant

published: 2022-05-04 9:30 | editor: | category: News

In the face of inflation, China’s lockdown measures, and supply chain issues, Delta commented at the investor’s conference that the company is expected to remain on a double-digit growth this year amidst robust dynamics in EVs and servers.

Delta hosted its investor’s conference today, and announced a record-breaking consolidated turnover of NT$82.538 billion for the first quarter, with a profit after tax of NT$6.059 billion under a YoY reduction of 8.6%, and an EPS of NT$2.33.

Delta attained more than 10% of growth in power and components, infrastructures, and automation, though the automation division had sustained a YoY reduction of 49% in profitability due to China’s lockdown implementations and elevated cost. Delta CEP Cheng Ping pointed out that the lockdown in China is focused on the Yangtze River Basin, which imposes significant impact to Delta’s Wujiang plant, where normal production and delivery are subject to daily variables under obstructed provision of raw materials.

Cheng pointed out that the major plants of Delta are located in Shanghai and Kunshan, and the situation is rather complicated since production and shipment status varies in each plant. Furthermore, Delta products are assembled with a large volume of materials, and will not be able to go on production lines from any sort of shortages, which is why the Wujiang plant had sustained drastic impact in capacity during April. Observation will be placed for May to see if any improvement is achieved.

Delta is currently holding onto a high level of inventory due to component mismatches and shortages of semiconductor components. Hai Ying-jun, Chairman of Delta, pointed out that the issue of shortage is also affecting Delta, though the status of the pandemic, warfare, and inflation will remain to be seen after May when the market logistics returns to the trajectory.

With that being said, Delta is expected to attain a double-digit growth this year. The company attained a revenue growth of 14% for the first quarter, of which servers saw an excellent performance thanks to growth in data centers. Cheng mentioned that the demand for machine replacement is high in China from a significant demand of automation, and that lockdown or material shortages are merely temporal factors, since automation is bound to be the destination for the medium and long term. He commented that although material cost has been rising each year, with increment also seen from the first quarter, the degree has now stabilized, and production cost should improve during the second half of the year.

Delta is also gradually expanding right now. China currently occupies 60% of the company’s capacity, while other countries such as Thailand and India are also following up by adding new plants or machine move-in. Delta is seeking for new plants in North America and Eastern Europe, while adding new plants in Wujiang and Wuhu. The company is going to maintain roughly 60% of capacity in China.

As for energy, Delta will still grow by 30-40% in Evs this year, which are orders obtained 2-3 years ago, and the main variable remains to be the macroenvironment. However, the good news is that EVs are experiencing a rapid growth, where overseas auto manufacturers are also presenting excellent financial statements. Hai is optimistic towards future development in energy storage, and pointed out that although energy storage systems are still relatively expensive right now, TPC’s power transaction platform will accelerate on the speed of recycling and emphasize on the importance of smart grids, which are going to generate additional interests among businesses for participation.

(Cover photo source: Delta)

announcements add announcements     mail print